CEO Talk | Harry Wang, Chief Executive Officer, Shiatzy Chen

PARIS, France— Long before the question arose about who would create the first Chinese luxury brand, Wang Chen Tsai-Hsia set up Shiatzy Chen to explore her tailoring skills and budding interest in serving the local luxury market in Taiwan.

Fast forward thirty years, and Ms. Wang now has a business with a turnover of more than $60m and growing, built through hard work, perseverance and — in the Chinese tradition — the support of her family, including husband Wang Yuan-hong, and their son Harry Wang, who now acts as the brand's chief executive.

Mr. Wang believes the business can grow to $200m in revenues by 2020. But rather than focus on growing the business in the West as so many brands from emerging fashion markets tend to do, he has his sights set firmly on Asia. Extending from the brand's home base in Taiwan to China and Japan is first on his list. Mr. Wang has also brought Shiatzy Chen's fashion shows to Paris, forcing him to up his communications game and consider the brand's role and customer targets in a global context.

I caught up with Mr. Wang during the last round of Paris shows to learn more about Shiatzy Chen and to benefit from his firsthand insights on the evolving nature of luxury in China.

BoF: Many of our readers will have never heard of Shiatzy Chen before. Can you tell us about the history of this family fashion business?

Harry Wang: Shiatzy Chen was created by my parents in Taiwan in 1978. My mother was the designer and my father focused on the business side. I was originally brought in around 2001 as my father’s assistant, overseeing almost every department except for design. Then my job was to develop the international market. Given the number of stores we have in Taiwan, I have been focusing on opening more stores in Hong Kong, China and elsewhere. The first boutique outside Taiwan was opened here in Paris in 2000, but we’ve had an office in here since 1990.

BoF: You’ve been showing in Paris for a few seasons now. Apart from international exposure, what were you hoping the Paris show would do for your business?

HW: I was hoping it would bring me some wholesale revenue, which turned out to be not very successful. But apart from that, we wanted to bring into focus the positioning of our brand. In Chinese department stores, we sit on the ground floor, right next to the big players. Our store in Beijing is right next to Fendi; in Hong Kong we are right next to Chanel. So, we are aiming to position ourselves higher on the global stage. We are not trying to fool customers, but rather trying to position the brand differently. We want to position ourselves as the most luxurious Chinese brand.

BoF: Do you see your aesthetic as being Chinese then?

HW: In the beginning, we did something very Chinese. But between 1985 to 1992 we were actually doing something that looked quite Western. It worked at the time because Western labels were not allowed in Taiwan. But after 1992, when all the big Western brands starting coming in, we felt that in order to be different we needed to do something more than just Chinese pieces. Today, we are known for taking Chinese details — embroidery, buttons, collars — and using Western cuts. We purchase all our fabrics from Italy, but more than 50 percent of these are our own designs.

BoF: What’s the biggest challenge you face as a brand based in Asia?

HW: The biggest challenge is internationalising the brand and trying to expand in Europe and the States. Selling in Asia is easier for us of course, because it’s closer and the culture is similar. We talk to our design team and tell them that if we want to be internationalised we need to do something very simple, sexy, the look has to fit Western tastes. Western people still like Western design.

BoF: What about the Chinese customer? When they come to Shiatzy Chen, what are they looking for?

HW: In Taiwan and China, they buy mostly the embroidered pieces. They feel, in terms of the craftsmanship and design, that Shiatzy Chen is very good; probably one of the best, and definitely comparable to the Western brands. They feel proud to wear our designs because we produce a very limited number of the same item. For instance, the jacket you just saw, we produced roughly one hundred pieces across four sizes. We manufacture about 70,000 pieces a year in total across 100 styles.

So, you see, we produce a lot of different styles, but in a very limited quantity.

BoF: And how is the business performing?

HW: Currently, we are making money in all of the markets in which we operate. The margins for the retail business are very good in Taiwan, but a bit less so in China because the expenses there are very high. Hong Kong is the most expensive market, followed by Shanghai.

Our margins in China are lower even though we sell the clothes at higher prices there. If I compare China with Taiwan, in China the rental is at least four times more, and sales tax is 17 percent compared to only 5 percent in Taiwan. Advertising costs are at least four times more per page. So, as an independent brand in China you can earn about 10 to 15 percent in operating profit, depending on your skill. In Taiwan, you can earn more.

BoF: Do you think the major international luxury brands are making money in China?

HW: I think the big players like Louis Vuitton, Chanel, and Gucci are making very good money. Smaller brands like Celine and Chloe, maybe Jimmy Choo, still lose money in China.

The more mass market Chinese brands which are inspired by bigger brands also make lots of money. For example Ports 1961 makes money. They have many distribution channels; their price point is good; they are positioned well; they show at New York Fashion Week; and they spend a crazy amount of money on advertising. Chinese customers feel that Ports is a Western brand.

BoF: You’re clearly changing the way you merchandise your store here in Paris compared to the way you merchandise your store in Taiwan. Do you think that Western luxury brands are sufficiently adapting their store assortment to Asia?

HW: I don’t know about ‘successfully’, but look at Chanel. They did a Chinese collection which, at least in my opinion, probably doesn’t sell at all. It’s very different from the ‘Chinese’ that we are looking for in Asia. They make it in an old way. It’s old fashioned, it’s not contemporary.

The Chinese customer wants to buy Western things from Western brands. In the 1990s Versace was very popular in Taiwan. Everybody wanted to have one of those really flashy shirts. In China today, it’s very much like market in Taiwan in the 1990s. People want to wear something to show that they have money.

I think in the next 5 to 10 years this will change and they will start to mix and match the design from different brands. But now, you go to Plaza 66 and you see ladies wearing D&G with logos everywhere. You can tell they don’t know how to mix and match it.

BoF: What about Hermès’ Shang Xia brand, which is billed a the first Chinese luxury brand?

HW: We are in the same shopping mall as Shang Xia, so I check their store every time, and I don’t really know what they are trying to sell. The way they are packaging themselves is very mysterious. They have a little section where they have chopsticks, glassware, all these plates, some selection of Hermès ‘comfortable wear’. But they don’t have a special look, there is no identity as yet. To me, Shang Xia doesn’t represent China. People know them as a subsidiary of Hermès and that’s why the press visit.

BoF: As you think about taking Shiatzy Chen as a business forward, what are your plans for the future in terms of growth?

HW: We feel that the main revenue will come from Asia, so our target is to open 100 stores altogether in China by 2020. Right now there are 10 stores in China, and this year we are opening another eight. It’s not very easy to achieve, and we are looking at about 20 to 25 stores in Japan if everything goes smoothly. So I think will have 100 stores in China, 50 in Taiwan, 25 in Japan, and we want to add up another 25 worldwide.